Chase Banker Convicted of Bribery

Chase Banker Convicted of Bribery

SAN DIEGO—Lynda Sanabria, a J.P. Morgan Chase banker, admitted in federal court today to receiving more than $200,000 in bribe payments related to Chase’s sale of mortgages on the secondary market.

As detailed in her guilty plea, Sanabria used her position and influence at Chase to ensure that her preferred customers won their bids to purchase mortgage notes. Sanabria received these bribe payments from San Diego businessman Israel Hechter, who pleaded guilty in September and admitted paying a total of $1 million in bribes to Sanabria and others. As detailed in Court documents, Sanabria began accepting bribes from Hechter and his associates as early as 2004, when Hechter offered to pay her on the side in return for providing inside information on loans that Chase was putting up for sale. Around 2004, he arranged to make a $70,000 payment to Sanabria, which Sanabria used to purchase property near Lake Havasu, Arizona. In addition, Hechter would provide the former Chase banker with a fixed payment (up to around $300) for each loan on which he bid. Pursuant to this arrangement, Sanabria provided Hechter with details about his competitors’ bids, which helped to ensure that Hechter was the winning bidder.

By 2008, Hechter stopped reporting the illegal payments to the Internal Revenue Service, and Sanabria stopped paying taxes on the illegal income. As noted in Sanabria’s guilty plea, Hechter later referred to the payments as birthday gifts or consulting fees, in order to disguise the fact that he was paying for influence over her decisions at Chase.

Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted as part of his guilty plea that he paid a million dollars in bribes to Sanabria and other bankers at GMAC and National City Bank. In order to make sure that Hechter’s bids were successful, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding process by supplying Hechter with confidential information about prices and competing bids.

Robert Moreno, of GMAC, was one of the other bankers to receive bribes from Israel Hechter. Last week, Moreno pleaded guilty, and admitted that he accepted more than $1 million in bribes from Hechter and from other GMAC customers.

After purchasing the mortgages from the various financial institutions, Hechter pooled the loans and sold shares of the pools to investors, usually friends and family members including his father, Zeev Hechter, his brother, Amir Hechter, and his employee, Jack Prober, each of whom also invested in the pools. After purchasing the loans, Ocean 18, LLC would service them and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.

“When bankers accept bribes, the real losers are businesses who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes,” said U.S. Attorney Laura Duffy. “We will continue to prosecute insiders who exploit their positions for personal gain.”

FBI Special Agent in Charge Eric S. Birnbaum commented, “By pleading guilty, Ms. Sanabria admitted corrupting the process and denying other businesses the opportunity to obtain valuable contracts. The FBI and our law enforcement partners are committed to pursuing anyone who illegally lines his or her own pockets at the expense of the public good.”

Sanabria entered her guilty plea today before U.S. Magistrate Judge Bernard G. Skomal. Sanabria is scheduled to be sentenced by U.S. District Judge Roger T. Benitez on January 19, 2015, at 9 a.m.

Israel Hechter, Zeev Hechter, Amir Hechter, and Prober each pleaded guilty in September to participating in the conspiracy and making hidden payments to Sanabria, Moreno, or others. They are all scheduled to be sentenced on January 5, 2014, at 9:00 a.m.. Moreno pleaded guilty to the same offense, and is scheduled to be sentenced on January 19, 2014, at 9:00 a.m.. Each of these defendants will also be sentenced by Judge Benitez.

The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency—Office of Inspector General, and Internal Revenue Service, Criminal Investigation.